The Commodity Futures Trading Commission (CFTC) is responding to a New York lawsuit brought by Attorney General Letitia James targeting two prediction market businesses by counter-suing.
The federal financial regulator is accusing the state of infringing on its mandate to provide oversight on the prediction market sector. James had accused Coinbase Financial Markets and Gemini Titan of promoting illegal gambling late last week.
Complaint filed at Manhattan Federal Court calls New York case intrusive
In its complaint, the CFTC asks the court to affirm its exclusive federal authority over event contracts and to permanently block New York from enforcing conflicting state laws against its registrant.
In a statement, the chairman of the CFTC, Michael Selig, claimed: “CFTC-registered exchanges have faced an onslaught of state lawsuits seeking to limit Americans’ access to event contracts and undermine the CFTC’s sole regulatory jurisdiction over prediction markets. New York is the latest state to ignore federal law and decades of precedent by seeking to enforce state gambling laws against CFTC-registered exchanges,”
Last week, James and New York Governor Kathy Hochul, both democrats, accused the CFTCof “prioritizing big corporations ahead of the interests of New Yorkers” while announcing legal action against the prediction markets.
In a joint statement, they said: “New York’s gambling laws are designed to protect consumers, whether they are placing bets in a prediction market or a casino. When gambling platforms, including prediction markets, violate our laws, we will not hesitate to hold them accountable. We look forward to continuing to defend our laws in court.”
Both Coinbase Financial Markets and Gemini Titan are being sued for $1.2 billion and $2.2 billion, respectively, according to the lawsuit, with James seeking to recover alleged unlawful profits and secure restitution for customers.
Wisconsin follows New York in suing prediction markets
Wisconsin filed lawsuits last week against several prediction market platforms, accusing them of running illegal sports betting operations in the state. The complaints name Kalshi, Robinhood, Coinbase, Polymarket and Crypto.com, along with affiliated entities.
Attorney General Josh Kaul said the companies are disguising sports betting as event-based contracts. “Thinly disguising unlawful conduct doesn’t make it lawful,” Kaul said, adding the state is seeking to shut down the activity.
Wisconsin law generally prohibits sports betting and most commercial gambling, with limited exceptions. The lawsuits allege the platforms collect fees on wagers tied to sports outcomes, effectively operating illegal betting systems under another name.
The state is asking courts to declare the practices unlawful and to issue orders blocking the companies from offering sports-related contracts to Wisconsin users. Officials also argue the activity constitutes a public nuisance.
Several companies pushed back, saying their products fall under federal oversight. Robinhood and Coinbase said their offerings are regulated by the CFTC, while Kalshi said it operates as a federally regulated exchange. It takes the total number of states taking legal action against prediction markets to at least seven.
CFTC work force down 24%, despite battle to reduce insider trading
The CFTC is trying to police insider trading across crypto, oil futures, and prediction markets while losing 24% of its staff since Donald Trump returned to office, according to recent reports. If those reports are accurate, it leaves the agency at its lowest headcount in 15 years, even as prediction markets expand at an explosive rate.
The Elon Musk-backed Department of Government Efficiency, or DOGE, pushed resignations across the federal workforce. Those cuts, which came under acting chair Caroline Pham, drew criticism from a former official. “There were cuts that were not exactly logical,” they said, adding experienced enforcement lawyers were let go. The reduction hit trial attorneys especially hard, weakening enforcement capacity.
Selig insists the agency remains effective despite fewer staff. He said in an interview recently: “There are no gaps in our ability to fulfill our mission,” citing AI tools and efficiency gains. He pointed to software and automation helping review filings and manage rising applications.
Following Selig’s first appearance as chair in front of congress, lawmaker Nikki Budzinski, an Illinois Democrat, was not sold on the staffing story. “I have deep concerns around the ability they’ll have to provide the proper oversight that taxpayers in this country deserve from the CFTC. He referred to efficiencies, which to me, is code for mass layoffs.”
